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LSDefine
Simple English definitions for legal terms
capital expense
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A quick definition of capital expense:
A capital expense is money spent by a business to get a long-term benefit. This type of expense cannot be deducted from taxes, but it can be used for depreciation or amortization. Examples of capital expenses include buying a building or equipment that will be used for many years.
A more thorough explanation:
A capital expense is an expenditure made by a business to provide a long-term benefit. It is not deductible, but it can be used for depreciation or amortization. Examples of capital expenses include buying a building, purchasing equipment, or investing in research and development.
For instance, if a company buys a new machine for $100,000, it cannot deduct the entire amount as an expense in the year of purchase. Instead, it can spread the cost over several years and deduct a portion of the expense each year.